nov
23
2021
por Felipe Rebello
0 comentários

When should you expect the break-even of your digital product? (Part 3/3)

When should you expect the break-even of your digital product? (Part 3/3)
por Felipe Rebello
0 comentários

If you are jumping directly into Part 3 of this series, we encourage you to check Part 1 and Part 2 and catch up on Disrupting and Sustaining innovation concepts.

Welcome back.

Today we will explain why being aware of innovation choices matters for your MVP development plan—finally, relating all the previous points.

Remember we mentioned that four months is a desirable timeframe for launching a simple MVP? Take a warm cup of coffee, sit comfortably and let’s consider what happens during this interval.

Fig1-Part3 Article: Fig1.When should you expect the break-even of your digital product?

We could spend weeks talking about all possible variations of this simple example. Each product is distinct, requires specific technologies, and the timeframe can vary (and will!). We suggest adopting this one as a reference point since it’s the average of all real cases we’ve seen first hand. It is a simplified version, so use it for learning. You can appropriate this new understanding next time you will knock on the door of a software agency to ask for a proposal.

The first important information we can identify is that the actual development time is not fours month, but three. We can’t highlight enough how much it’s essential given the fact that 80% of the time, we see founders who want to start coding right away. We know, it’s that disruptive innovation feeling we are all aware of, those chills in the neck, we love it. But before building something, we need to know what to build. A prototype with a list of functionalities is not enough for the development team to start working. That is why the UX/UI Design phase is the mother of digital product development. One of my favorite phrases is 1h of product design saves 10h of product development.

1h of product design saves 10h of product development.

Before deciding to move forward and start coding (building your product), you should require from your tech-partner the following deliverables: Lean Canvas, User Journey, Service Blueprint (if applicable), User Story Map, Low to Mid fidelity prototype (clickable and updated after user interviews), User Interview Report, NFR (non-functional requirements), acceptance criteria for each user story and list of technologies recommended for building and hosting your application, and the most important: a menu of functionalities and strategical alternatives to consolidate them into the MVP scope. Getting into details on how each deliverable works is out of this article’s scope, except the last.

Why a menu of functionalities?

When building a digital product, there are so many options. Having them organized is essential for choosing the best strategy. We’ve seen many cases where founders are convinced that a specific scope is the best option, even without looking at other possibilities.

Fig2-Part3 Article: Fig1.When should you expect the break-even of your digital product?

In this example, the team came up with three different MVP strategies. The yellow with three main functionalities aims at disrupting. The green with four also aims at disrupting. Finally, the blue with another 3, but aiming at sustaining innovation. Each strategy aims to deliver value to users differently, tending more for disrupting or sustaining innovation. The exciting aspect is that usually, founders start with a set of functionalities (say F1, F2, F3, F4, F5, and F6). After the UX/UI design phase, user research, competitors research, and user interviews, the team might come up with F7, F8, F9, and F10 (or more), unlocking more MVP strategies. The magic of the creative process is when founders, developers, and designers work together to create the MVP scope.

As you can see, there is much work before deciding to move forward to development. It is a tipping point on your digital journey.

The point is that three months of development is a short time to deliver value (even though we’ve seen cases that the development team managed to do it in 1 month, rare cases, but they indeed exist). Now, if you are sustaining innovation, most probably, the value that is possible to deliver to customers when launching the MVP 🚀 was already validated by the market via previous competitors (even when the market is employees within a large corporation). Customers won’t be surprised by your product’s functionalities, revenue model, and channels, which is ok. It’s even better if you look for the predictability lenses, and investors love predictability. Start seeing where we want to go with this text? The bottling line is: The market-fit for sustaining innovation is already there; the team does not need to pursue it as disrupting innovation is striving for, relentless and furiously.

But investors also like fast-scalable business models that can deliver 2x, 3x…in a specific timeframe. Even if disrupting is riskier, the returns might also be more significant. It’s like playing poker.

Now, what happens if you are trying a business model that aims at disrupting? There is a massive chance that you won’t find a product-market fit after launching the MVP. And we’re not saying that sustaining innovation is 100% safe; no, what we’re saying is that statistically speaking, there are more failure chances in disrupting than sustaining innovation. So if the goal is to disrupt the market, better be ready for 12 or 24 (or even more) months of product development budget so your team will have the luxury to fail many times and still keep playing the game. Airbnb, for instance, first became profitable during the second half of 2016 after been launched in 2008. Extreme, but the reality of disruption.

Ok, you decided only to sustain innovation, the safer way. Should you try to disrupt at some point? If yes, when? Well, as the saying goes, ‘if you don’t innovate, someone else will, so watch out!‘ Fortunately, we have a suggestion that might help you with this decision. After experiencing many cases, it’s safe to assume that a mix between both approaches is an intelligent strategy to choose. If you have less than eight months of product development budget to find market-fit, we suggest splitting your efforts 80/20 between sustaining and disrupting innovation. The sustaining part we would split again 80/20, being 80 for product development and 20 for product design. The disrupting part, at least initially, we would focus totally on product design, user research & interviews. In other words, do what we call the Product Discovery, the holy grail of digital products, the philosophical stone of product owners.

Fig3-Part3 Article: Fig1.When should you expect the break-even of your digital product?

This strategy allows the team to reduce risks and still gamble in the attractive disrupting innovation. Like a volcano, it can explode and change the earth as we saw unicorns doing here and there (just if it was easy!).

Putting it all together in a timeline for didactic reasons, we would have something like this:

Fig4-Part3 Article: Fig1.When should you expect the break-even of your digital product?

After launching product version 1, the design team has finished conducting a strategical discovery for a new value proposition, revenue model, or channel. The team can immediately insert its insights in the subsequent design & development round, making the product’s version 2 a bit less sustaining and a bit more disruptive.

Building a digital product is a marathon, not a sprint.

How much should you expect to invest in product development if you try to disrupt innovation at all costs? We’ll cover this topic in a further article. For now, we wish to convey that bringing to awareness if you are disrupting or sustaining innovation might help answer investors’ questions and set the expectations for when the ROI might come.

If this article interests you, we kindly ask you to share it with your network. Designing, building, launching, and scaling digital products is a beautiful art, an exciting journey that might take you to incredible places. If it were easy, everyone would have successful outcomes, but the reality is cruel, and the statistics are there. The best we can do is sharing our experience and knowledge, hoping that product owners and visionaries will not repeat the same mistake. Let’s join forces and collaborate.

If you are looking for a tech partner who can guide you through your digital journey, let’s connect, our team will be happy to share what we’ve learned over the past 12 years and 500 projects.

Visit our website: https://performait.com/?idioma=en

Talk to Felipe Rebello, our Head of Growth EMEA: https://www.linkedin.com/in/rebello/

Keep creative & thank you for reading.

Compartilhe